science

Independent financial adviser

Independent financial adviser is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Independent financial adviser rather than just read about it. In short: An independent financial adviser (IFA) is a professional who offers independent advice on financial matters to their clients and recommends suitable financial products from the whole of the market. The term was developed to reflect a United Kingdom (UK) regulatory position and has a specific UK meaning, although it has been adopted in other parts of the world, such as Hong Kong and Australia, where financial adviser…

Key takeaways

Independent financial adviser belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Independent financial adviser to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Independent financial adviser from memory before moving on to harder problems.

Reference excerpt

An independent financial adviser (IFA) is a professional who offers independent advice on financial matters to their clients and recommends suitable financial products from the whole of the market. The term was developed to reflect a United Kingdom (UK) regulatory position and has a specific UK meaning, although it has been adopted in other parts of the world, such as Hong Kong and Australia, where financial advisers are regulated under the Australian financial services licence (AFSL) regime. The term "independent financial adviser" was coined to describe the advisers working independently for their clients rather than representing an insurance company, bank or bancassurer. At the time (1988) the UK government was introducing the polarisation regime which forced advisers to either be tied to a single insurer or product provider or to be an independent practitioner. The term is commonly used in the United Kingdom where IFAs are regulated by the Financial Conduct Authority (FCA) and must meet strict qualification and competence requirements. Typically an independent financial adviser will conduct a detailed survey of a client’s financial position, preferences and objectives; this is sometimes known as a factfind. The adviser will then recommend appropriate action to meet the client's objectives; and if necessary recommend a suitable financial product to match the client’s needs. Individuals and businesses consult IFAs on many matters including investment, retirement planning, insurance, protection and mortgages (or other loans). IFAs also advise on some tax and legal matters.

New rules for financial advisers in the UK from 2013 From the end of 2012, there will be two types of financial advisor: independent or restricted. IFAs will no longer be allowed to receive commissions from financial services companies on new sales of investments. Instead, they will have to set their own fees, based on the services they offer, and agree with the client on fees before providing any services. Any advice that does not meet this standard must be labelled as restricted. IFAs should also be able to demonstrate to the FCA that they review all the suitable products in a market and that they give fair, unbiased and unrestricted advice. These changes are intended to make their charges more transparent and advice more genuinely independent. However, some banks, building societies and insurance advisers could switch to offering an ‘information only’ (non-advised) service instead, where fees won’t be apparent. Advisers will also be allowed to keep earning it on products they have sold before the end of 2012, and still charge a regular fee if they are providing an ongoing service such as reviewing and advising on a client's investments. Neither do these new rules apply to the sale of cash savings products, general insurance, protection products (term life insurance, critical illness cover, income protection insurance etc.) or mortgages unless they are sold at the same time as a regulated investment product.

Qualifications for IFAs in the UK To offer financial advice an individual must represent or be an appointed representative of a firm registered with the Financial Conduct Authority (FCA). The FCA require that firms ensure that individuals acting for them have appropriate qualifications. The list of appropriate qualifications is determined by the Financial Services Skills Council[link removed] at the behest of the FCA. Up to the end of 2012 all financial advisers only required a qualification at Level 3 or above of the Qualifications and Credit Framework. From the end of 2012, financial advisers will need to be qualified at Level 4 or above. (This is about the same as completing the first year of a university degree.) An increasing number of advisers are now also “Chartered”, which means being qualified to a level 6 standard (equivalent to a first class honours degree.) From the end of 2012, financial advisers will need to obtain an annual Statement of Professional Standing. This statement confirms that the adviser is suitably qualified, that the adviser subscribes to a code of ethics and that the adviser has kept his or her knowledge up-to-date through continuing professional development. Most financial qualifications are assessed under the Qualifications and Credit Framework (QCF). You will see that these have a QCF grade, from level 1 to level 8.

IFA Network IFA Network is an association of IFAs. All financial advisers in the UK must either be authorised or exempt under the Financial Services and Markets Act 2000. Membership of an IFA Network qualifies an IFA as being exempt from regulation. The IFA Network is then responsible for the advice and regulatory compliance of its members. Source: Financial Conduct Authority What is an appointed representative? An appointed representative is a firm that conducts regulated business on behalf of a directly FCA-authorised firm, who is its ‘principal’. The principal firm takes regulatory responsibility for the appointed representative, and must ensure it meets FCA requirements.

Notes and references

See also Financial advice Financial adviser Financial planner Pensions in the United Kingdom Self-invested personal pension Collective investment scheme

External links "Getting financial advice". MONEYmadeclear. Financial Services Authority (FSA). Archived from the original on 2008-01-18. "Getting financial advice". The Association of Investment Companies. Archived from the original on 2007-02-06. "Financial resolutions". The Guardian. 2007-01-15. A guide to choosing an IFA

Worked examples

Example 1 — a first encounter with Independent financial adviser

Start with the simplest possible case. Write down what Independent financial adviser claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Independent financial adviser before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Independent financial adviser ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Independent financial adviser

In research: Independent financial adviser appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Independent financial adviser in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Independent financial adviser is common in secondary-school and first-year university syllabi. It links to neighbouring topics Financial advisors, so understanding it makes those chapters shorter.
In everyday life: Look for Independent financial adviser outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Independent financial adviser in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Independent financial adviser means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Independent financial adviser out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Independent financial adviser in simple terms?

Why does Independent financial adviser matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Independent financial adviser?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Independent financial adviser.